Maiden results since being unbundled from Telkom.

HILTON TARRANT: Pieter Uys is the CEO of Vodacom. Pieter, your maiden numbers on the JSE today, interim results for the six months to September. A lot of earnings numbers. You've got a slump in net profit, you've got core headline earnings per share up 8%, headline earnings per share down 12% and earnings per share down 99%. I guess I'm not the only confused one - which earnings numbers should we be looking at?

PIETER UYS: Um, none of those. There are a lot of non-cash hopefully once-off items in there, so if you take those headline earnings, and that's what we base the dividend on, and you strip out those once-off non-cash items, it was actually up 8% to R71 per share, and that's what we also then based the dividend on. But if you look at the group's performance specifically South Africa, it had some good core drivers coming from that - still helping subscriber growth in all of the operations, revenue growth, South Africa's ... service revenue, second quarter stronger than the first quarter, so that's a positive sign. EBITDA margins up to 35% in South Africa. Cash - good cash generation, operating free cash flow up 29% in South Africa to R5.7bn.

HILTON TARRANT: Pieter, your subscriber growth in South Africa impacted by Rica. We've all been impacted in one way or another by the need to now register. How severe is that impact?

PIETER UYS: Ja, Rica started on first July, and a subscriber can't be switched on until he shows us his ID document and proof of residence. So up till July we were still connecting a million a month. In August it dropped down dramatically to below 300 000. We are educating the market, the distribution, we are educating subscribers, new subscribers, old subscribers, so we are slowly seeing gross connection come up already -100 000 more in September. But it has impacted. So if you look at August and September the base reduced by a million customers, and we are now sitting on 28.2m.

HILTON TARRANT: Pieter - interconnect, one of the other hot potatoes, hot topics in the market at the moment. A fairly substantial risk to the South African operation, because there is no real clarity from government or from the regulator as to the timing and the magnitude of those cuts in the tariffs.

PIETER UYS: Ja, first of all you have to look at the mobile termination rate in the context of the potential financial impact on the company. Total interconnect revenue is R4bn, but our interconnect cost is R3.1bn, so the net exposure is just under a billion rand for the six months, which is now 11% of EBITDA. Where it's going - we are still in discussions with the various stakeholders, being the Department of Communications, Icasa. So the preferred outcome is still that there's an agreement where we have an immediate reduction, then an agreed ... path down to we propose 60c blended, and then let the Icasa process also run and when they get to their final number we will take it down to that number. But let's at least get some certainty around this.

HILTON TARRANT: Pieter, one of the good bits of the results, nearly a million broadband customers in this country.

PIETER UYS: Yes, end of 2004 we'd built a solid broadband business. We've grown the subscribers 53% in South Africa. Also what we learned in South Africa we are taking to the rest of the continent. So if you take Tanzania, they also had 40% growth in data revenue. South African data - this is pure data - grew by 31%. If you take pure data, in other words, GPRS, 3G... and you add the messaging, which is also a  kind of data, it makes up 15.5% of services revenue, which is a fairly substantial chunk of the business.

HILTON TARRANT: You have trimmed costs in your international operations - very competitive markets. You have also trimmed capex for the international operations. Looking at growth in the months to come and years to come, is a fairly substantial portion of that growth going to come from offshore?

PIETER UYS: If you look at the subscriber numbers, a third of our customers now come from outside South Africa. We've had some fairly substantial headwinds from the international businesses, mostly driven by the weaker economic conditions. We have re-focused on cost in all of those operations, positioning the company better for the leaner times. We've also become more competitive in those markets, offering compelling offers to the subscribers. Slowly we are seeing the ... come back, we've taken back some market share in all of those markets, churn has come down. Coming out of this I think we have a better-run operation in the international businesses.

HILTON TARRANT: Pieter Uys is the CEO of Vodacom - a dividend being declared on 110c/share, the share closing down 0.7% at R52.02 today.

• Subscribe to a daily email of transcripts from Moneyweb Radio - click here

COMMENTS

View disclaimer

 

responses to this article

Name
Subject
Comment

View disclaimer